Inquiry ducks key issue: did Adam Werritty's backers profit?

Cabinet Secretary's report criticised as superficial as it fails to cast light on donors to former Defence Secretary and his 'adviser'

The official inquiry into Liam Fox's conduct was dismissed as "superficial" last night after it failed to answer all the questions over the affair that cost him his job as Defence Secretary.

Mystery remained over whether the businessmen who funded Adam Werritty – his friend and self-styled adviser – had clients that might have benefited from Mr Fox's decisions as a minister. Although Downing Street had promised that the investigation by Sir Gus O'Donnell, the Cabinet Secretary, would address "all the unanswered questions", Labour claimed it had fallen badly short and called for a much wider inquiry.

In what appeared like a game of pass the parcel, No 10 suggested the remaining questions about funding were a matter for the Electoral Commission. But the Commission said the evidence does not yet "warrant a formal assessment". It suggested that any failure by Mr Fox to report donations was a matter for the Parliamentary Standards Commissioner.

Jim Murphy, the shadow Defence Secretary, said: "What we need is a much wider investigation into so many other issues that this report does not begin to scratch the surface of. This is a murky business and it has not yet been resolved."

He added: "The report didn't look at the web of influence, it didn't look at the money. Very many people gave money to Mr Werritty and his different organisations. I'm sure they gave it to exert some influence and power over Mr Werritty and those with whom he rubbed shoulders."

Sir Gus did unearth one new donor to Pargav, the company set up Mr Werritty and which funded his globe-trotting to the tune of £147,000 so that he could be at Mr Fox's side. He is Michael Davis, the chief executive of Xstrata, the FTSE 100 mining company, who heads the United Jewish Israeli Appeal, a UK charity.

The Cabinet Secretary said: "There is no evidence that Pargav sought to win contracts from the Ministry of Defence (MoD) or to influence procurement decisions. Both Mr Werritty and Mr Fox are clear that Mr Werritty never lobbied Mr Fox on behalf of donors." But Sir Gus concluded that Mr Fox's actions "clearly constitute a breach of the ministerial code" and "a failure of judgement." He revealed that the former Defence Secretary had brushed aside his civil servants' concerns about Mr Werritty's role, saying Mr Fox should have told them Mr Werritty was a friend with a company financed by donors, some of whom had funded Mr Fox when he was in opposition.

Such a critical verdict would have cost Mr Fox his Cabinet post if he had not resigned. It reduces his prospects of returning to frontline politics and fulfilling his Tory leadership ambitions.

Sir Gus also concluded that in giving his friend details of the overseas trips in his diary, the former Defence Secretary had "posed a degree of security risk not only to Mr Fox, but also to the accompanying party" – which would on some occasions have included military chiefs. But he concluded Mr Werritty had no access to classified documents and was not briefed on classified matters.

The report disclosed that Mr Fox turned down an offer to take an official from his private office to a meeting with Harvey Boulter, a defence supplier, in Dubai last June. This was "unwise and inappropriate".

Downing Street backed five recommendations for ensuring the ministerial code works better.

Mr Fox said: "I am pleased that the report makes clear that the two most serious allegations, namely of any financial gain sought, expected or received by myself, and any breach of national security, have no basis."

O'Donnell report: The unanswered questions

Who is Adam Werritty?

The report says he is "not a lobbyist" and that he has a private firm, Todiha Ltd, but does not say what it does.

Was he making money from his relationship with Fox?

The report says Fox made no money from knowing Werritty, and that Werritty did not lobby the MoD on behalf of donors, but does inquire into how he made a living.

What impact did he have?

The report says he "did not impact on foreign or security policy" but that his business cards "risked creating the impression that he spoke on behalf of the UK Government". But what is the point of posing as a government adviser if it is not to gain influence?

What is the point of Pargav?

Some of the donors who paid into this organisation seem to have been surprised that it was paying for Mr Werritty's jet-setting lifestyle. What were they told was its purpose?

Did Fox approach other donors, apart from Jon Moulton, for donations?

The report lists the other donors, but says nothing else about them.

What was the role of Atlantic Bridge?

The report does not mention this former charity, where Werritty was chief executive and Cabinet ministers, including Fox, were on the letterhead.

Were other ministers allowing friends to act as unofficial advisers in the same way?

Public reaction suggests the issue will not go away until there is an investigation into whether other ministers are being influenced by unaccountable "advisors".